Annual Expenses $30,000
Divided by 300 (total annual inspections)
Cost per inspection $100
So I look at my fuel cost trends. Obviously, fuel cost over the last 6 months has gone up. I am spending approximately $100-150 more per week.
For me, that is an easy calculation with my average number of inspections. I just bumped them all up about $25.
I think multi inspector firms will need to dial these costs in more because small cost increases multiply exponentially.
Fee is based on Square footage, Age, and Mileage;
NACHI Fee Calculator
Farther away, other inspectors have the mileage advantage if the inspection is price driven. A $100 difference in price is not always the motivating factor for a buyer to choose one inspector over another. Case in fact: I’m the only NACHI certified inspector within 75 miles of here, in an un-licensed state. That alone is worth $100 to many buyers. Sell all your advantages in your email cover letter. Let the price driven ones go.
When busy, up your price a bit and see what happens!
This is why I hired an accountant to do my taxes. All the different regulations, cans, cannots, etc… It can be enough to make your head explode.
It’s because of all of the out of staters that have moved here from areas that don’t get snow with their high priced vehicles and low coverage insurance policies. I can’t believe how many vehicles I see in the ditch when it snows compared to 10 years ago, or 5 years for that matter. It’s stupid. Idiots think 4x4 or AWD means they can hall arse on ice/snow like they do on dry pavement. I even carry full comp/collision on my old “burb” just because of those morons. My insurance agent told me it’s the UN-insured and UNDER insured that cause rates to climb in many areas, but I think it’s only part of the story…
I do not charge customers for mileage within my service area which is enormous. Trip fees only apply to outside my normal service area.
Larry, I really like the spread sheet and I am going to use it. For my purposes I would remove the hourly expense so I can see just the vehicle cost.
We don’t charge for mileage unless the inspection is way outside our service area, but your chart is a great way to determine your “hidden vehicle costs”.
Many inspectors think they make good money but don’t fully understand their expenses. Your spread sheet really lays out what it costs to drive a nice vehicle.
Keep in mind that the IRS allows a $0.54 per mile deduction. My travel is built into my pricing, and I typically cover up to a 1 hour 15 minute each way drive. Most of my jobs are within 20-30 minute (each way). Like others have said, when you start adding on costs, pricing can get complicated, and clients may start feeling like they are getting nickled and dimed. Keep it simple.
Just to add to this, for 2022 the deduction is 58.5 cents per mile.
If you do the math in the OPs’ spreadsheet, you will see his actual costs are not far from this (a bit below). For simplicity’s sake, one can just use the IRS amount as your approximate cost per mile.
On the topic of IRS deduction be sure you all know how it works. It’s NOT every mile when you leave your driveway. IRS insists everyone has a commute to/from work (non-deductible) so the only truly deductible miles are the legs of travel BETWEEN jobs throughout the day. Home to first stop and last stop to home are NOT deductible.
I believe that’s only if you have a regular “job site,” which the IRS defines as being at the same place of work for more than a year.
Here’s what I found on a search and it’s right in line what my accountant has told me:
Commuting Miles vs. Business Miles: What's the Difference? | Indeed.com.
I don’t think the IRS cares if we have a job site or not. Their stance is that everyone has to pay for a commute to and from work. Our “job site” is our home inspection on any given day. Of course, if you have to stop at the bank a mile from your house to deposit checks or do other business related banking then the “commute” becomes the one mile from the bank home. And, if you have to go to the post office that is 1/2 a mile from your house on your way out in the morning then everything from the post office to your inspection to the bank is deductible and you “commute” is home to post office and bank to home. Post office to inspection and inspection to bank are deductible. This is the same scenario my account used.
What if you drive a mile from your house to your office, or even walk to work/office, Then drive your vehicle to your job site/home you’re going to inspect, Then drive home?
From the IRS…
Temporary work location.
If you have one or more regular work locations away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location, regardless of distance.
If your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary unless there are facts and circumstances that would indicate otherwise.
Office in the home.
If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. (See Pub. 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business.)
And if you are in a 20% tax bracket, that 58.5 cent deduction only saves you saves you 11.5 cents on your taxes. The balance of your travel expense comes out of your profit.
What’s interesting is that it appears you must have a “home office” to get the first-stop deduction. I would have never guessed that until your post prompted me to research it. I would guess most of us could claim to fall under example #2.
From the IRS…
Examples of deductible transportation.
The following examples show when you can deduct transportation expenses based on the location of your work and your home.
You regularly work in an office in the city where you live. Your employer sends you to a 1-week training session at a different office in the same city. You travel directly from your home to the training location and return each day. You can deduct the cost of your daily round-trip transportation between your home and the training location.
Your principal place of business is in your home. You can deduct the cost of round-trip transportation between your qualifying home office and your client’s or customer’s place of business.
You have no regular office, and you don’t have an office in your home. In this case, the location of your first business contact inside the metropolitan area is considered your office. Transportation expenses between your home and this first contact are nondeductible commuting expenses. Transportation expenses between your last business contact and your home are also nondeductible commuting expenses. While you can’t deduct the costs of these trips, you can deduct the costs of going from one client or customer to another.
That’s me. I’ve been able to deduct all of my miles to and from all of the inspections that I perform, for several years. Probably my biggest deduction, or one of them.
Yeah, I mean the IRS isn’t going to reimburse you for your business expenses. They just say you don’t have to pay taxes on the portion of revenue equal to your expenses.
Office in the home is a whole other can of worms. It doesn’t just mean you have an office in your house (we all have that). You MUST make your money in that office. Meaning for us we’d need to actually perform our inspections in our home. Just scheduling doesn’t count. Report writing? I suppose there may be an in for a partial deduction buy my accountant has always told me to not bother. Examples of office in the home are therapists that actually see patients in their home and things like that.
My information/opinions are +/- 10 years outdated and things might have changed I’ve been told numerous times to not bother trying to claim the office in the home deduction. You get stuck with all kinds of things on the backend - paying taxes on the portion of your house’s appreciation that you deducted, etc.
I can see where the IRS guidance might be interpreted that way. I have never done the deep dive into the actual rules until your initial post above.
I would be curious to hear if other inspectors with an accountant have received guidance either way on this. I have been doing my own taxes since I was 20 so I don’t have an accountant.
I agree about the home office deduction. I have always heard it is one of the most highly audited items. That said, I believe you can have a “home office” for purposes of the mileage deduction, without claiming home office expenses on your taxes.
When y’all get this figured out, let me know.
I know what I’ve been doing for many years, as my accountant told me to do.